Type 2 diabetes (T2D) is a major complication of obesity, and is caused by multi-organ insulin resistance in conjunction with inadequate pancreatic insulin secretion. Weight loss in obese people who have T2D can improve both insulin secretion and insulin action, and even result in complete remission (normal glycemic control without diabetes medications). Bariatric surgery causes marked weight loss and is the most effective available therapy for T2D. Moreover, it has been proposed that surgical procedures that bypass the upper gastrointestinal tract, such as roux-en-Y gastric bypass (RYGB), have weight loss-independent effects in achieving glycemic control. Although it is clear that RYGB surgery has profound effects on the metabolic response to oral glucose or meal ingestion, it is still not known whether RYGB has long-term, clinically important, weight loss-independent effects on the key factors responsible for diabetes remission in patients with T2D, namely ?-cell function, insulin sensitivity, and integrated 24-h glucose and fatty acid homeostasis, after marked weight loss has been achieved. Therefore, the overall goal of this proposal is to carefully address these issues in obese subjects with T2D. Accordingly, we will evaluate the effects of 16%-18% weight loss induced by either RYGB surgery or a low-calorie diet (LCD), matched for energy intake and rate of weight loss, on: 1) hepatic and skeletal muscle insulin sensitivity (assessed by using the hyperinsulinemic-euglycemic pancreatic clamp procedure, and by evaluating the suppression of endogenous glucose production in response to mixed meal ingestion), 2) ?-cell function (i.e. insulin secretion and disposition index; assessed i response to both an oral mixed meal and an intravenous glucose bolus), and 3) 24-h glucose and free fatty acid (FFA) homeostasis (assessed by measuring glucose and FFA concentrations and kinetics over 24 h) in obese (body mass index 35-55 kg/m2) subjects with T2D. In addition, we will study subjects with T2D who are likely to have a measurable beneficial response to weight loss therapy (i.e. those with duration of T2D <10 yrs, who have reasonable glycemic control, and who are not being treated with insulin) to increase our ability to detect a potential difference between surgery and diet therapies. We hypothesize that, compared with the same weight loss induced by LCD therapy, RYGB will lead to: i) greater improvement in hepatic but not skeletal muscle insulin sensitivity; ii) greater improvement in ?-cell function assessed in response to ingested glucose but not intravenous glucose; and iii) greater improvement in 24-h glucose and FFA metabolism. This project will answer the question of whether RYGB has clinically important weight loss-independent effects on the metabolic processes that regulate glycemic control after patients with T2D have lost a considerable amount of weight. The results from this study are of physiological and medical importance, and will help identify specific metabolic targets for future research studies.